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‘The days when councils could claim that every problem could be answered by a cheque from Whitehall are over,' new communities secretary, John Denham, will warn today.

In a speech to the CIPFA conference in Manchester, Mr Denham is to waste no time in telling councils he will oversee a slowdown in spending brought on by the economic slowdown. Although overall government spending should rise in real terms, he will say, local authorities ‘will need to make each pound work harder than ever'.

Highlighting the estimated £43bn spent on procuring goods and services each year, and the desire for continuing public service reform, Mr Denham will urge councils to move beyond mere efficiency savings to look ‘fundamentally' at how services are delivered in future. ‘This money can just buy a standard service at the lowest-possible cost – or it can be used to encourage innovative businesses, including local businesses, to provide innovative solutions which deliver better value for money.

‘This is a huge opportunity for local government to show the rest of the public sector the way,' he will say.